What  Is the Inflation Adjusted Price of Corn?

Corn has almost quadrupled in price in nominal terms since 2000. In July of 2000 corn was making lows of around $75/ metric ton with highs for the year up around $95/ton.  In August of 2011 corn was selling for over $310 a ton.  Roughly from 3 to 4 times as much.  Obviously , corn is volatile if it can move 30% in a few months. This can be due to weather conditions causing crop failures or other external factors.

There has been speculation that the recent dramatic increase in the price of corn is the result of ethanol becoming part of the gasoline mix. 

But obviously that is only part of the equation. The real question is, "What is the price of corn in real (inflation adjusted) terms.

In the chart below, the black line represents the nominal (or actual price) per ton of corn since 1981. As you can see the nominal price stayed between $75 and $150 up until 2006. The only exception was a couple of months during 1996 when prices spiked up to $200. From 2006 onward however, prices have been climbing and haven't gone below $150 a ton. One of the reasons given for this "floor" under the price of corn is the increased demand from ethanol producers who use it to produce a gasoline additive / alternative.

Click Chart for larger Image

However, when you adjust corn prices for inflation you find that the current spike in the price of corn is actually lower than the peak made in 1984 and just slightly higher than the spike in June of 1996. During the early 2000's corn prices were so low farmers could hardly afford to produce it anymore.

It is not surprising to see corn and other commodity prices rising along with oil.  All commodities rely on oil for production and transportation to some extent (unless you are using oxen to plow your field).  

So you would expect a positive feedback relationship for the price of oil.  But there are other reasons too.  Both oil and corn have become somewhat interchangeable with the advent of corn based ethanol. 

But an even more important reason is that inflation is primarily a monetary event.  It is caused by an increase in the money supply and as time goes on it spreads evenly over all commodities.  Initially,  corn or oil or pork bellies may rise quicker but as time goes on it levels out somewhat like water flowing to all the various commodities.

See the article on the Inflation implications of Ethanol for more information.

Corn Prices Courtesy of Indexmundi

Inflation Indexed Bonds (i-Bonds) are supposed to protect you from inflation while providing a reasonable return. How well have they done?

See Other Inflation Adjusted Prices:

• Inflation Adjusted Gasoline Prices
• Inflation Adjusted NYSE Stock Index
• Inflation Adjusted Price of Corn
• Inflation Adjusted College Education Costs
• Inflation Adjusted Electricity
• Inflation Adjusted Price of Gold
• Real Mortgage Rates

Inflation based on CPI-U for  U.S. Bureau of Labor Statistics.

About Tim McMahon

Work by editor and author, Tim McMahon, has been featured in Bloomberg, CBS News, Wall Street Journal, Christian Science Monitor, Forbes, Washington Post, Drudge Report, The Atlantic, Business Insider, American Thinker, Lew Rockwell, Huffington Post, Rolling Stone, Oakland Press, Free Republic, Education World, Realty Trac, Reason, Coin News, and Council for Economic Education. Connect with Tim on Google+